Why India must respect international arbitration

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The Financial Express


India’s 3-crore-plus pending cases in various courts, and the decades it takes to get justice, is both a source of immense hardship for those unlucky enough to have legal trouble as well as one of the main reasons for India’s low Doing Business rankings.While the government-Supreme Court standoff is seen as one of the reasons for this, it is just a small part of the picture. Indeed, if the  standoff has delayed filling up judges’ posts in the Supreme Court as well as various high courts, it doesn’t explain why there are around 4,000-odd posts empty in the subordinate judiciary which are not appointed by the central government. The real reasons include lack of money to build more courts, not enough digitisation etc.

Given this, it is not surprising that the government—and not just this one—has been keen to push arbitration and conciliation as an alternative means of dispute resolution. Since there are enough retired judges as well as domain experts, and the arbitration doesn’t have to be done in court rooms, this is an obvious solution. Earlier this week, the Cabinet cleared the setting up of the New Delhi International Arbitration Centre Bill. As part of this, not only will an international arbitration centre be set up in Delhi but also the Centre will set up a Chamber of Arbitration that will empanel arbitrators and maintain a permanent panel; an Arbitration Academy to train arbitrators may also be established. Over time, it is entirely possible that, as the government plans, India could become a leading centre for global arbitration; indeed, once there is global arbitration, even if the law does not allow foreign lawyers to practice in Indian courts, this should open up a lucrative window of practice for them.

There is, though, a fly in the ointment, and that is the attitude of the government towards arbitration. The government is, today, one of the biggest litigants in the country so, should it desire, by acting in a sensible manner to begin with, a large part of the problem will be taken care of. More worrying, however, is the attitude towards arbitration, especially that done internationally. In several cases like Reliance-ONGC and Antrix-Devas where the government (or PSU) has lost an arbitration case, instead of paying up, the government has challenged this in a local court; ideally, arbitration awards should be implemented immediately, and only challenged under extreme circumstances. Indeed, in the Tata-Docomo case, where the government was not even a party, it argued that while it was true that an arbitration court had asked Tatas to pay Docomo damages based on a contract they had signed, since the contract was not permitted under Indian law, the damages couldn’t be paid. Fortunately for Docomo, the Delhi high court said that even if paying the damages meant the Tatas were violating the Fema law, the contract was sacrosanct and, if need be, the Tatas could pay the Fema penalties as well. And in several cases involving Cairn Energy and Vodafone, the government stand has been that the cases cannot even be arbitrated; in some others involving Reliance Industries, the government tried to delay the appointment of arbitrators on one ground or another. If the government is not going to respect international arbitration, it is difficult to see how international investors are going to be convinced that India is a viable location for arbitration.

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